TBILISI

Georgia’s central bank projected economic growth at 10 percent this year as the ex-Soviet country continued to demonstrate economic recovery and a rise in demand after months of contraction due to the restrictions that  imposed to curb the coronavirus pandemic.

Gross domestic product (GDP) grew by 12 percent year-on-year in January-August after contracting 5.6 percent in the same period last year, the National Statistics office said. In August alone, the economy expanded by 10.3 percent, compared with a 5.3 percent contraction a year ago. Growth was recorded in all sectors of the economy except for the mining industry and construction.

“According to the updated forecast, real GDP growth of 10 percent is expected in 2021, which is mainly due to still sizeable fiscal stimulus, pent-up demand and a high growth rate of lending,” the central bank said in a statement.

“In the increased crediting the higher contribution of foreign currency loans is particularly noteworthy, against the backdrop of increased funding costs of lari. Strong credit activity is a boost to current economic activity, however, at the same time, it hinders the reduction of inflation,” it added.

Georgia’s highly tourism-reliant economy has been hit especially hard by the COVID crisis and lacks the resource-extraction or manufacturing base that has helped cushion the blow in some other ex-Soviet countries.

The country started its economic recovery in April when it recorded 44.8 percent year-on-year growth. Economic recovery continued to gather pace as the country eased the majority of the restrictions it had imposed to curb the coronavirus pandemic, businesses reopened and tourists tentatively started to return.

The country brought some restrictions back in August amid a hike in the number of infections and fatalities.

In July, Georgia revised its economic growth forecast to 7.7 percent from a previous projection of 4.3 percent in 2021 amid signs of economic recovery and in line with the International Monetary Fund’s (IMF) current projection.

The ex-Soviet country’s parliament has also lowered the budget deficit to 6.9 percent from 7.6 percent and the government’s debt to 54.6 percent of GDP.

The IMF said in July that Georgia’s GDP was now projected to grow 7.7 percent in 2021 and 5.8 percent in 2022. Earlier this month IMF said that significant risks, including slow vaccination, remained to Georgia’s economic recovery.

The World Bank said in June that Georgia’s economy was projected to recover in 2021, growing by 6 percent, with the key baseline assumption that there would be no further severe waves of COVID-19 infections that necessitate additional lockdowns and ongoing political impasse is resolved. The recovery will be supported by fiscal stimulus in the form of accelerated capital spending, tax deferrals, accelerated VAT refunds, and targeted support for the most affected businesses, as well as higher social spending.

Under a baseline scenario in which no third wave of infections materialises and a significant share of the population is vaccinated by 2022, economic growth could recover to 5.0 percent in 2022 and 2023.

In August, Fitch Ratings has revised the outlook on Georgia’s long-term foreign-currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDR at ‘BB’.